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The maker of Smirnoff vodka and Captain Morgan rum is set for a showdown with HM Revenue and Customs over a £107m dispute.

Diageo has said it will pay the sum, made up of additional tax and interest for its 2015 and 2016 financial years, but only because it is obliged to do so in order to lodge an appeal.

The issue relates to the Government’s diverted profits tax regime, which was launched in 2015 to prevent multinational companies diverting profits made in the UK to low tax jurisdictions.

It is understood the HMRC is focused on the group’s blended whisky brands, which include Johnnie Walker, and white spirits, which potentially includes its vodka and gin brands such as Smirnoff and Gordon’s....